The mere mention of global warming raises the temperature level of political discourse. On one side, many conservatives concede that the earth is getting warmer, but they do not believe that human activity is necessarily the cause -- and even if it is, they argue, there's little we can do about it. On the other side, some environmentalists believe that radical measures are called for -- measures that could grind economic growth to a halt.

Unfortunately, all the heated rhetoric obscures some viable, middle-of-the-road approaches. I strongly believe in the power of free markets, and I think we can use free-market solutions to attack global warming without imposing an undue burden on the world economy.

Key facts

I believe that global warming is real, that it stems mostly from the increase in greenhouse gases and that it does pose a long-term threat. The basic facts are well known. The world is pumping about 8 billion tons of carbon emissions from fossil fuels into the atmosphere each year, up nearly 500% from 1950. That number is likely to double by mid century if nothing is done to curtail emissions.

Global warming is expected to accentuate climatic extremes. Some areas of the world, particularly those in the far north, may benefit as the length of growing seasons increases. But warming is likely to bring excessive rain to some regions and drought to others. The Intergovernmental Panel on Climate Change (IPCC) expects an increase in the frequency of major cyclonic storms, such as the intense hurricanes that hit the Gulf Coast in 2005.

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In my opinion, the most costly consequence of global warming is the possibility of rising ocean levels caused by melting ice and the expansion of warming water. Sea levels would rise by 23 feet if all of Greenland's ice sheet melted, and another 230 feet if all of Antarctica's ice melted. The latter scenario would submerge more than half the world's population. The IPCC predicts that sea levels will rise only 7 inches to 2 feet by the end of this century, although it is said the figure could be much greater, depending on ice-flow dynamics and other factors. But even modest melting could trigger climate changes that would make many of the world's largest cities uninhabitable and dramatically reduce the world's arable land.

Many believe that any attempt to curtail carbon emissions will sharply reduce economic growth and cause severe economic hardships. I disagree.

For starters, one study has shown that just by using today's technologies, it would be possible to reduce emissions by several billion tons per year without doing much harm to world economic output. This could be accomplished by increasing the amount of electricity produced at nuclear-power plants, doubling the fuel efficiency of automobiles and using more-energy-efficient technologies in buildings.

Consider the energy-efficiency improvements in California, which has the toughest environmental laws in the country. On a per-person basis, Californians use about one-third less energy than the average American and emit only about half as much carbon dioxide. Yes, energy prices are high in California, but no one I know would call the state impoverished because of its energy-saving initiatives.

Economic solution

The best way to conserve energy and slow global warming is to raise the price of carbon emissions. And the best way to do that, in my view, is to use the European Union's "cap and trade" system. The government sets the maximum amount of carbon dioxide and other greenhouse gases that may be emitted, then establishes a market that allows businesses and individuals to buy and sell rights to produce the emissions. The price the market sets for these rights gives consumers and producers clear signals about how to conserve.

Once the proper price is put on greenhouse emissions, it should be the market -- not the government -- that picks the most efficient way to avoid them. (For this reason, I object to the Bush administration's plans to stimulate the production of ethanol, which may require as much energy to produce as it saves. This approach is simply a giveaway to special interests.)

We can take other actions to raise the price of carbon emissions, moves that would also have the effect of reducing our dependence on foreign oil. A tax on imported oil, matched by an across-the-board decrease in other taxes, would accomplish both of these goals without raising taxes overall.

And we shouldn't underestimate voluntary efforts by citizens to cut carbon emissions. The public surprised the "experts" 30 years ago when it embraced recycling. Global warming has caught the public's attention even more than recycling did a generation earlier.

Some prophets of doom warn that it may already be too late to stop the warming process. Even if the world can stabilize -- or reduce -- the amount of carbon emissions, some observers think the current levels of carbon dioxide are so high that the earth will continue to warm. Unfortunately, the pessimists could be right. The heating of the soil and tundra increases the activity of microorganisms, which further increases CO2 and methane emissions. Furthermore, as the oceans warm, they absorb less CO2, and the melting of the ice caps reduces the earth's reflective properties, which ward off some of the sun's rays. Ironically, as we reduce the amount of particulate matter in
the atmosphere (also known as air pollution), we also increase the sun's power to warm the earth.

New realities

If we are already past the point of no return, then we will have to prepare ourselves for climatological and geographical changes that will adversely affect the world's economy. But we should continue to take measures to reduce global warming, even as we learn how to adapt to the new realities on land, in the seas and in the air. We can do much to stanch carbon emissions without establishing a maze of price controls and regulations.

Making a determined effort to reduce greenhouse emissions is a sensible insurance policy no matter the outcome. If we prevent warming, we will all be winners. If we can delay the warming process, then we will have more time to adapt to climate change. If our efforts go for naught and extreme weather changes occur anyway, future generations will at least know that we didn't just sit on our hands. The most damning action is to do nothing.

Columnist Jeremy J. Siegel is a professor at the University of Pennsylvania's Wharton School and author of Stocks for the Long Run and The Future for Investors.

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